An acute shortage of homes for sale has led forecasters to predict UK property prices will rise by more than 20% over the next five years.
Data from the Royal Institution of Chartered Surveyors reveals that the supply of homes for sale – as measured by the average number on a chartered surveyor estate agent’s books – had fallen to its lowest level since records began in January 1978.
It says the UK property prices could rise by 25% over the next five years and adds that an anticipated post-general election “supply bounce” has failed to materialise, with the north-west and London seeing the sharpest drop in instructions compared with April.
The views of the RICS are supported by property group JLL. It warns that if house prices surge again without a radical increase in new homes it will become “unaffordable to exist” in parts of Britain for the young.
JLL’s latest forecast points to the average cost of a house in the UK rising by 22.8% over the next five years, with Greater London seeing property prices going up by 29.4%.
However, official Land Registry figures show there was a significant slowdown in the rate of property price growth in April.
The month-on-month slowdown was the biggest since April 2006. The main cause was a sharp weakening of the top end of the London market, with sold prices in the capital increasing at a lower rate than the UK average for the first time since early 2006.
In the month before the general election – when fears of a Labour Party victory overshadowed the top end of the property market – house prices in London rose by 2.3% to an average of £474,544, representing annual growth across the capital at 10.9%.
But in other parts of the country not affected by the threat of the Labour Party’s Mansion Tax, house prices accelerated at a faster rate. The biggest monthly price increase in April was in Yorkshire and the Humber, where residential property values increased 2.7% over the month to an average of £123,471.
There was also strong growth in north-west England, which registered a 2.1% rise during the month. According to the Land Registry, annual house price growth is now 5.1% – down from 9.6% in March – with the average value of a home in England and Wales up to a £196,067.
While the Land Registry data shows an unsurprising 34% fall in the number of sales of homes worth £2m or more in April, more worrying are figures revealing that between November 2014 and February 2015, sales volumes averaged 64,196 transactions per month. This is a decrease from the same period a year earlier, when sales volumes averaged 73,156 per month.
The increase in confidence among home buyers and sellers seen by an increase in estate agent activity after the general election could cause property prices to accelerate at a greater pace than seen in the first half of 2015. This will put pressure on house buyers to seek ways of reducing the cost of moving home.
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